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Cover Me

Mandatory health insurance may be bad for business.

Starting next year, Massachusetts will require every state resident 18 and older to have health insurance, and Massachusetts companies with more than 10 employees that don't offer insurance must pay an annual $295 fee per employee.

"I think it's well-intentioned, but not a very good idea," says Aaron Green, 37, founder of Professional Staffing Group, a 10-year-old Boston staffing firm with annual sales of $35 million. Green, who provides insurance for his 50 employees and his temp work force, is concerned the law will impact wages. He's also worried about a surcharge written into the law that could force small employers who don't offer insurance to pay up to 100 percent of employee health-care costs when costs for the entire company surpass $50,000.

Companies can bypass this surcharge by creating a specific kind of cafeteria plan that allows workers to obtain health coverage on a pretax basis, says John McDonough, executive director of Health Care for All, a Boston health-care advocacy group. "It's a minimal charge for an employer to establish one of these plans," he says, adding that the $295 annual fee is far less than employers would pay for traditional health coverage.

Obstacles remain, like whether the state and insurance companies can agree on a coverage plan. "There are still a lot of challenges ahead in the implementation," says Alan Weil, executive director and president of the National Academy for State Health Policy, a Portland, Maine, health-care policy analysis and consulting organization.

If the Bay State's experiment works, entrepreneurs nationwide could feel the effects. Says Weil, "There are a lot of folks in other states watching carefully to see how it plays out."

Chris Penttila is a Washington, DC-based freelance journalist who covers workplace issues on her blog, Workplacediva.blogspot.com.

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This article was originally published in the September 2006 print edition of Entrepreneur with the headline: Cover Me.

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